China: Not So Blue

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For the first time, CFO Europe’s latest quarterly Business Outlook Survey includes a dedicated poll of finance chiefs in China. Gauging the sentiment of 380 CFOs, the survey finds senior finance executives in the country in a good mood, relatively speaking.

More than 40% of China-based CFOs say they’re more optimistic about domestic economic prospects than they were the previous quarter. That’s less cheerful than colleagues elsewhere in Asia (60%), but much rosier than CFOs in Europe (26%) and the US (14%), where credit market turmoil is weighing heavily. (See “By the Numbers.”)

Across the world, CFOs cite rising labour costs as their top concern, but finance chiefs in China do so the most forcefully, projecting an average wage increase of more than 8% over the next 12 months. Other high-ranking concerns include regulatory changes and currency values, worries that barely register among CFOs’ priorities outside China.

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The issue of quality and safety of goods made in China is an issue of global interest, though only 8% of CFOs in Europe and the US say that they are re-evaluating their supply chains as a result of recent product recalls. Nearly a third of CFOs in China, on the other hand, say that disputes over product quality are affecting their business. More site visits and audit requests top the list of changes since the spate of recalls, while 16% of CFOs say that customers are shifting orders away from China to other low-cost locations. Should that percentage rise in the coming quarters, the mood in China will become moribund.